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Future Freight Markets - Mr Shriram Sivaramakrishnan
- 1. Dry Bulk Freight Markets A peek into what is ahead Shriram Sivaramakrishnan Associate Editor Shipping and Freight 7-Mar-2018
- 2. Platts Shipping Consists of a global team, working from offices in London, Singapore and Houston Publishes three daily reports: Dirty Tankerwire, Clean Tankerwire and Dry Freight Wire Hundreds of daily assessments, real time news, analysis, unique reports, podcasts, videos Hands-on expertise in freight markets through daily engagement with a wide variety of sources, including brokers, charters, shipowners, traders, agents etc. Robust methodology to ensure transparency and integrity in all assessments To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 2
- 3. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 3
- 4. Latest from Platts: Time Charter Equivalents To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 4
- 5. Latest from Platts: Time Charter Equivalents • After prolonged consultation with the industry, Platts launched TCE assessments for Supramax, Panamax and Capesize vessels to reflect the $ per day pricing derived from the respective voyage rates published on a $ per metric tons basis in the Platts Dry Freight Wire • Platts TCE assessments are derived from voyage charter freight rates, which are largely considered as a leveling factor for the shipping market. The calculation is done meticulously with a set of standardized parameters such as vessel size, port cost, bunker consumption/cost, vessel speed etc., which are obtained through an exhaustive industry survey • Dry bulk shipping companies track their earnings in $/day and having a TCE index to compare against time charter and voyage charter rates, makes it an ideal index that can be used to hedge freight risk • The TCE analysis along with technical analysis can offer guidance to shipowners, operators and charterers to make informed trading decisions To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 5
- 6. Agenda • Supply Outlook: Decreasing tonnage growth • Demand: Steel • Demand: Iron ore • Demand: Metallurgical Coal • Demand: Thermal Coal • Demand: Grain • Demand: Minor Bulk To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 6
- 7. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 7 Source: Bancosta Research +15% +12% +6% +5% +3% +2% +3% +2% +2% -0% 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) mlnDWT Projected Total Dry Bulk Fleet Growth (all units over 20,000 dwt ; assuming 30% slippage) Dry Bulk Fleet Size (in mln DWT) Y-o-Y Growth
- 8. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 8 Source: Bancosta Research +14% +11% +5% +5% +1% +2% +3% +2% +3% +0% 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) mlnDWT Projected Capesize+VLOC Bulk Fleet Growth (only units 120,000+ dwt ; assuming 30% slippage) Capesize+VLOC Fleet Size (in mln DWT) Y-o-Y Growth
- 9. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 9 Source: Bancosta Research +18% +17% +9% +5% +2% +0% +3% +2% +2% -0% 0.0 40.0 80.0 120.0 160.0 200.0 240.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) mlnDWT Projected Panamax+Post-Pax Bulk Fleet Growth (only units 65,000-119,999 dwt ; assuming 30% slippage) Panamax+Post-Panamax Fleet Size (in mln DWT) Y-o-Y Growth
- 10. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 10 Source: Bancosta Research +16% +10% +6% +5% +8% +6% +4% +1% +0% -1% 0.0 30.0 60.0 90.0 120.0 150.0 180.0 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) mlnDWT Projected Supramax Bulk Fleet Growth (only units 40,000-64,999 dwt ; assuming 30% slippage) Supramax Fleet Size (in mln DWT) Y-o-Y Growth
- 11. Supply Growth Restricted • Current order book to fleet ratio points to slower fleet growth over the coming few years • Demolitions likely to be encouraged by various regulations • Risks arising from increasing number of new orders that are being placed since late last year on the back of a more positive outlook To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 11
- 12. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 12 Source: World Steel Association, October 2017
- 13. To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 13 Source: World Steel Association, October 2017
- 14. China Steel Production To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 14 640 660 680 700 720 740 760 780 800 820 840 860 2012 2013 2014 2015 2016 2017 mil MT Source: National Bureau of Statistics
- 15. Global Iron ore trade flow To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 15 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2010 2011 2012 2013 2014 2015 2016 2017 2018(f)2019(f)2020(f)2021(f)2022(f) mil MT Source: Drewry Maritime Advisors
- 16. Global Metallurgical Coal trade flow To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 16 Source: Drewry Maritime Advisors 0 50 100 150 200 250 300 350 400 2010 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 2021(f) 2022(f) mil MT
- 17. Diversifying Origins: To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 17 Source: Snp Global Platts CFlow Coking coal out of Vancouver: 2017
- 18. Diversifying Origins: To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 18 Source: Snp Global Platts CFlow Coking coal out of Vancouver: 2015
- 19. Growing Steel Demand • Global steel production is trending higher keeping pace with world economic growth • On the back of this demand for raw materials – iron ore, metallurgical coal trades too are growing To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 19
- 20. Global Thermal coal trade flow To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 20 Source: Drewry Maritime Advisors 0 100 200 300 400 500 600 700 800 900 1,000 2010 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 2021(f) 2022(f) mil MT
- 21. Thermal Coal: Major Importers To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 21 Source: Platts Analytics 0.0 50.0 100.0 150.0 200.0 250.0 Japan S.Korea Taiwan China HK India Malay Vietnam Thailand Phillipines mil MT 2017 2018 2019 2020 2025
- 22. Thermal Coal: major Exporters To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 22 Source: Platts Analytics 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 Columbia USA South Africa Indonesia Australia Russia mil MT 2017 2018 2019 2020 2025
- 23. Thermal coal trade growth slower • Consumption of coal in power generation growing in the Pacific, but the largest consumers also have huge coal reserves • Coal demand created from newer uses of coal • Global trade being largely affected by governmental policies To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 23
- 24. Global grain trade To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 24 Source: International Grains Council, December 2017 0 50 100 150 200 250 300 350 400 450 Wheat and coarse grains Rice Soybeans mil MT 16/17 17/18 18/19 19/20 20/21 21/22 22/23
- 25. Grain trade growing with population • Future gains in global grains production may not be as fast as in the preceding five years and may be outpaced by growth in demand. • Increases in consumption will continue to come mostly from food (mainly wheat) and feed (mainly maize). To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 25
- 26. Minor Bulk: the niche with surprises To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 26 0 200 400 600 800 1,000 1,200 1,400 2010 2011 2012 2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 2021(f) 2022(f) mil MT Source: Drewry Maritime Advisors
- 27. Conclusion: • Growth in vessel supply is expected to be slow given the lower order book to fleet ratio that we currently see. • Fleet utilization is likely to increase given the new regulations that are coming around over the next 2-3 years • But vessel supply has always come online extremely efficiently in the past two decades • Demand picture looks relatively bright across most of the commodities and expected to grow 3-4% in 2018 To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 27
- 28. Take aways •Volatility…so hedge •Weather…so predict •Politics…so assess To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 28
- 29. Thank You To change, turn on or off footer: Inset > Header & Footer > Enter / change text > Click Apply All. 29
Editor's Notes
- For deliveries in 2017, we recorded the delivery of 425 dry bulk vessels over 20,000dwt, for a total of 37.0 mlndwt. These included: 13VLOCs(3.4mlndwt), 59 Capesizes(11.6mln dwt), 13 Post-Panamaxes(1.2mln dwt), 100 Panamaxes(8.1 mln dwt), 161 Supramaxes(9.8 mln dwt)and 79 Handysizes(3.0 mln dwt). After assuming delivery slippages, deliveries in 2018 could come in at a lower level of around 25 mln dwt. For demolitions in 2017,we saw a total of 191 vessels amounting to 13.6 mln dwt demolished. Most of the vessels demolished were Supramaxes with 3.2 mln dwt(68vessels)scrapped. Demolitions of Handysize, Panamax, and Capesize vessels came in at 1.3mlndwt(47vessels), 3.2mlndwt(45vessels) and 3.7 mln dwt (22vessels) respectively. For new orders in 2017, 175 new orders totalling 24.2 mln dwt were reported. This included 29VLOCs(9.5mlndwt), 39 Capesizes(7.9mlndwt), 6 Post-Panamaxes(0.6mlndwt), 47 Panamaxes(3.8mlndwt), 22 Supramaxes(1.4mlndwt) and 32 Handysizes(1.0mlndwt).
- The Capesize fleet registered the largest net increase of 7.9 mln dwt, followed by Supramaxes at 6.6 mln dwt,and Panamaxes at 4.9 mln dwt. Delivery of 15 mil dwt; 5.7 mil dwt demolished in 2017 Expected deliv in 2018 11 mil mt, 46% of this is larger than 380k dwt ; New orders 29VLOCs(9.5mlndwt), 39 Capesizes(7.9mlndwt) – mostly at chinese yards Order book to fleet ratio is back abv 10% after more orders placed in 2017
- Order book to trading fleet – is 9.1% 2017: delivery was 9.3 mil dwt; 80% were kamsarmaxes 2018 expected delivery is 6-7 mil dwt; again mostly kmx 2017 demolitions were 47 units of 3.7 mil dwt; far lower than 120 vsls demo in 2016 New orders in 2017: 43; only 2 in 2016
- 2018 delivery expected at 7-8 mil mt compared to 13 mil mt in 2017 In 2017, 56 units were ordered, 24 were umx out of this Umx ve 19% order book to fleet ration
- We have counted 17 new Kamsarmax orders plus six options placed in the last month. We also noted 7 new Ultramax orders plus one option
- China: out of planned 150 mil mt capacity cut by 2020, china has closed 115 mil mt capacity by 2017.
- Avg growth rate of about 2.5% Current Chinese stocks piles is abt 150 mil mt. low was abt 80 mil in mid 2015. Chinese imports in 2017 grew 4.9% to 1075 mil mt Downside risks Destocking cycle Futher curbs on steel capacity More winter prod cuts Lower domestic steel demand Competition from scrap
- Origins are diversifying New tech reducing the use of coking coal http://www.ectltd.com.au/fulfilling-indias-steel-ambitions-with-new-tech/
- Cflow: Vancouver outbound
- Cflow: Vancouver outbound
- China coal: Looking forward to 2018 however, we look for significantly weaker electricity demand growth as we do not expect a third year of such hot temperatures, and some of the environmental restrictions on industry will cause a deceleration in electricity demand growth. On top of this weaker demand growth, we see a rebound in hydro generation combining with similarly-sized growth in wind/solar/nuclear generation. This will depress thermal generation well below prior-year levels. India: shipping estimates point towards robust Y/Y incremental growth in imports from November to the current date, with steam coal imports in January rising by ~ 3 MMmt Y/Y. The coming months will be a litmus test of how quickly CIL is capable of ramping up its output, failing which, India’s increasing reliance on imported coals will persist. South Korea – imports increased in 2017-> nuclear reactor outtages+new coal fired capacity coming online. But, consumption tax from apr 2018 could cap S Korea: While electricity demand (and coal-fired generation) was stimulated by the colder than normal conditions in February, this came on top of higher demand associated with the Winter Olympics in Pyeongchang. With constrained nuclear generation and strength on the demand side, it would not be surprising to see that coal-fired generation hit new record levels in Jan/Feb, and Y/Y growth in imports returns over the next several months. Vietnam: We project that Vietnam’s imports will rise by 3.6 MMmt Y/Y in 2018 and a further 3.3 MMmt in 2019
- Wheat : World trade is expected to steadily grow, with new peaks from 2019/20, led by increased shipments to Asia and Africa. The Black Sea share of total exports is seen continuing to expand. Rice: Prod is increasing in the Pacific Basin with slight improvements to productivity World soyabean output is predicted to grow to successive highs during the next five years, as producers devote more acreage to the oilseed amid expectations of sustained growth in trade and consumption. Area increases are seen averaging 1.8% p.a., mostly tied to bigger sowings in South America, chiefly Brazil, amid large land availabilities, while modest yield improvements are also likely. Asia’s growing needs are seen continuing to boost traded volumes during the next five years, with China’s imports accounting for two-thirds of all shipments in 2022/23. Brazil should be the biggest exporter throughout the period.
- Average of 4% annual growth rate in demand from Minor bulk Spodumene from australia – used to make batteries Pet coke – criss crosses the globe Limestone given the growth in steel, cement production Clinker movements increasing into b’desh